Paying bills is a task that most people dread. With many companies, such as utilities and cell phone companies offering a monthly automatic credit card billing option, it can be tempting to sign up for this service. But while we are all looking to save time and hassle, is this actually a smart financial move?
Bigger benefits than just saving time
One of the most obvious benefits is that automatic payments save time because you do not have to sit down and manually pay your bills each month. But actually, the most important benefit is that setting up autopayments can help increase your credit score if you have the bad habit of occasionally pay bills late. "If you pay bills late, even utilities and cell phones, then these late payments get reported to the credit bureaus which lower your credit score," says Beverly Harzog, Independent credit card expert and consumer advocate. "By setting up automatic payments, your bills are paid on time, and you don't miss any payments because you are traveling or forgot." For those of us who play the credit card rewards game, automatic payments can be a great way to earn additional rewards points or frequent flier miles. By using your credit card with the highest rewards benefits for autopayments, you will most likely earn the plane ticket, hotel stay or experience that you are coveting even quicker.
But what are the downsides?
As with most things that offer a convenience, there are several disadvantages to setting up autopayments that you should be aware of before signing up. The adage "out of sight, out of mind" is often very true when it comes to paying your bills. Many people forget about the autopayments that they have signed up for until they open their credit card statement to find their balance is much higher than expected.